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End of the highway looms for Holden

Carmaker faces extinction as US owners do the maths on Australian industry

Models like the 1974 HQ Kingswood have cemented the Holden name in Australian popular culture. Photo / Richard Robinson

Holden can still pick winners.

The troubled automotive manufacturer backed Australia in last week's league clash with New Zealand, and its about-to-be superseded VE Commodore has been voted the best car the nation has ever produced.

But it is pretty much all downhill from there. The company that tied itself to "football, meat pies and kangaroos" is facing the real prospect of eventual extinction as its American owners do the maths on the Australian car industry.

They are not good.

Rising costs, cut-throat competition, a limited domestic base and similar woes have already made the industry dependent on government subsidies - and even with these the outlook is dark.

While politicians and car bosses exude faith in long-term survival, Holden managing director Mike Devereux this month announced the loss of 500 more jobs - 170 went in December - with no assurances for the future.

"There are no guarantees about how many cars will be sold in 2016 or 2022, so I cannot guarantee how many human beings I will need seven to 10 years from now." Deveraux said.

Mitsubishi's former managing director, Graham Spurling, minced no words. His company pulled out of Australia in 2008, and he sees no future for Holden.

"For anybody like the Premier of South Australia to think Holden is going to stay here until 2022, as they say in that classic movie The Castle, 'He's dreaming, love'," Spurling told ABC radio.

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He was Ford's global chief for four years and said after Holden announced the latest job cuts that he had lost his earlier confidence in the survival of the Australian industry.

"The signs aren't good, and particularly when the car industry is reducing the number of engineers they have in the workforce, that's a leading indicator of a reduction in future programmes and future technology," he said.

With Mitsubishi's and Nissan's departures, only Holden, Ford and Toyota remain.

While Holden publicly expects to continue manufacturing until 2022, there is mounting speculation that Ford's refusal to guarantee production of the Falcon beyond 2016 could see the company shutting up shop.

The loss of Holden would be an immense blow to the Australian psyche, and to the nation's already struggling manufacturing sector.

Despite the fact that the former saddlery has been owned by General Motors since 1931, and spent much of its life producing rebadged versions of American, European and Japanese vehicles, including Chevrolets Toyotas, and Opels, it continues to be regarded as an Australian icon.

Its production lines and world-recognised design centre in Melbourne have, with the rest of the industry, been considered a strategic asset heavy in technology transfer and employment - directly and downstream, the industry accounts for about 50,000 jobs.

Employment now is probably the most urgent concern of Holden's problems.

In the past decade the company's difficulties have increased, losing share in a ruthless market.

The latest round of cuts will prune its workforce of 4000 by more than 10 per cent, and production by 10,000 cars a year. The design centre will be gutted, effectively ending local designs with the introduction of the VF Commodore. Sales of both the Commodore and the smaller Cruze have dived.

Holden has been hit by a series of blows common across the sector - the longer-term impact of earlier tariff cuts, declining local sales, and a high dollar that has boosted imports of cheaper foreign cars, many produced with heavy government subsidies.

Mr Deveraux described the market as "brutal", with costs of production in Australia rising 60 per cent in the past decade.

While a record 1.12 million new vehicles were sold in the year to last February, sales of Australian-made cars have halved since 2005.

Already small by world standards, the Australian market is looking even more like a losing horse to the remaining car manufacturers.

To keep production lines open the federal Government has handed Holden almost A$2 billion ($2.4 billion) since 2001, most recently A$275 million promised by the Commonwealth, Victoria and South Australia.

Across the industry, the federal Government is working through a car plan that between 2008-09 and 2020-21 will hand over A$5.2 billion, with possibly more if car fortunes continue to decline.

Facing the remorseless decline of Holden and other carmakers, SA and Victoria are also trying to convince Canberra and the other states to follow their policies requiring government fleet managers to give preference to Australian manufacturers - unlikely to be greeted enthusiastically by states struggling under rising costs and budget deficits.

Federally, Labour continues to back subsidies to support a "competitive and sustainable industry" but the Coalition, likely to win power in the September 14 election, wants alternatives to continued subsidies.